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State budget & taxes

Having narrowly avoided a government shutdown on October 1st, our legislators got perilously close to Halloween before approving final budget documents for the fiscal year that was already one month old. One of the less controversial, but still critical, items, was the School Aid budget, which determines per-pupil spending limits and state aid payments to local school districts. Constant readers will not be surprised that we – like many others concerned about school funding – found the budget bill to be a mixed bag. The bill does provide for a modest increase in per pupil funding, and resumes closing the gap between lower and higher-spending districts. But overall state spending for school aid is flat, and our lawmakers have made no clear commitment to invest in education. School aid revenues remain vulnerable, and the future of the extended services tax – the one part of the compromise revenue package which increased direct revenue to the school aid fund – became more uncertain as the month wore on. Our forecast: storm clouds ahead.

*In the early hours of Monday morning, our lawmakers prevented a state government shutdown with a deal that left both sides bloody. However, all it bought us was time: a final agreement on the state budget remains to be sealed.*

As I'm sure you know, time is running out for a budget deal in Lansing. The new fiscal year starts tonight at midnight, and the Governor has already made plans for a government shutdown.

So the pressure is on, as it should be. But sometimes, during protracted late-night negotiations where everyone is playing "let's make a deal," people can lose sight of what's really important. Let's remind them!

*When efforts to broker budget compromises on the floors of the House and Senate failed, our lawmakers essentially punted: the two houses sent gutted, but still incompatible, versions of an income tax bill to conference committee, where a handful of lawmakers will get to try again.*

*The state House remained deadlocked this morning on revenue measures intended to plug the $1.7 billion hole in the state budget, including the school aid fund.* House Speaker Andy Dillon had warned members to "bring their sleeping bags."

*Nearly every school district passed its budget for this year last June, our children went back to school this week, and the State's new fiscal year begins in 24 days. But, as yet, there is no agreement in Lansing on what schools will be allowed to spend this year, let alone how it will be paid for.*

You would think this would put school systems in a bind, and you would be right. Sadly, the fate of our schools and our children's education takes a back seat to larger issues, namely: who is going to take the blame for increasing taxes.

*As bills make their way through both houses of the Legislature, it is becoming clear what kinds of "reform" measures the Republican caucuses in both houses will demand in return for allowing a vote on new or increased taxes.* In the House, a bill is set to come to the floor which would limit health care plans offered to teachers by local districts, pegging them to the plans offered to the non-unionized civil service. In the Senate, a package of bills would encourage public employers, including schools, to band together into large pools to negotiate for health insurance. The Senate plan has attracted bipartisan support as well as support from public sector unions, with the notable exception of the MEA(Michigan Education Association). ("See our earlier coverage.":http://www.miparentsforschools.org/node/76) Changes to the teacher's retirement system just recently passed the Senate ("see earlier story":http://www.miparentsforschools.org/node/85). Some other bills recently introduced in the House make it clear that the effort to score political points will not end soon.

*The Republican majority in the Senate passed changes in the state teacher retirement system today, the first plank of their "reform" platform to emerge from the chamber.* Senate Republicans have insisted on significant changes in public expenses, many of which focus on public school teacher retirement and health benefits, as the price of allowing (and implicitly supporting) a vote to increase taxes for the next fiscal year (see related story). The measures, "SB 546":http://legislature.mi.gov/doc.aspx?2007-SB-0546 and "SB 547":http://legislature.mi.gov/doc.aspx?2007-SB-0547, would increase employee contributions into the pension system, require retirees to pay a portion of their health benefits, and tighten eligibility for full retirement benefits. The measures passed on party-line votes.

Late Friday, Michigan's top lawmakers hammered out a deal which both prevents last-minute cuts to schools and closes the current year's deficit without a tax increase, but at a cost. Most of the cuts from the regular state budget went to fund increases for health care and prison beds, both of which are projected to increase because of the poor economy. To fill the overall gap, the Legislature intends to sell rights to some future tobacco settlement fund revenues ("securitize" these revenues), among other things. Closing the current year's deficit without a tax increase is evidently part of an agreement with Senate Republicans not to block a vote on an income tax increase for fiscal 2008.

Dear Speaker Dillon and Senator Bishop,
On behalf of Michigan Parents for Schools, including parents and concerned citizens across the state, I ask you to do your utmost to craft a budget agreement which invests in our public schools rather than pulling the props out from under them at this critical time.